Domino’s Pizza Expanding in Asia

Facing sluggish growth prospects in a weak U.S. economy, Domino’s Pizza Inc. is increasingly looking at Asia to expand with a plan to open about 200 stores annually as the appeal of Western fast-food rises across the region.

Outside the U.S., pizza is an almost $90 billion business growing as much as 5% every year and Asia – with a middle class that is growing by the millions and eating out more thanks to higher disposable income on the back of fast-growing economies – presents an attractive option for Domino’s, Richard Allison, the company’s vice president for international operations, said in an interview in Kuala Lumpur this week.

“More and more people in Asia are viewing pizza as a very attractive dining option, not just for special occasions, but for regular consumption,” Mr. Allison said.

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In the July-September period, Domino’s sales at restaurants that were open at least one year rose 5% overseas, with India – where it has more than 400 locations – being the Ann Arbor, Michigan-based company’s fastest-growing market. This compares to 3.3% growth within the United States.

Asia’s resilience to the global downturn has partly helped increase Domino’s business in the region, Mr. Allison said. “One of the things that make our business recession-resistant is our (product’s) value,” he said. “In Malaysia and other markets in the region, you could feed a family for 10 ringgit ($3.28) per person.” A Domino’s large pizza starts at MYR32.80 ($10) in Malaysia.

Still, pizza remains largely an urban phenomenon, appealing mostly to youth and is far from becoming a daily food item across a region that counts rice as staple.

Domino’s started as a single pizza restaurant in 1960 in Ypsilanti, Michigan, founded by brothers Tom Monaghan and his brother, James. It has expanded to more over 70 countries and overseas operations account for more than half of its revenue. Mr. Monaghan announced his retirement and sold his controlling stake in 1998 to Bain Capital for $1 billion.

The company has 4,896 stores in the U.S. while its network spans 5,144 outlets in international markets. In September, the company opened its 10,000th store in Istanbul, Turkey.

All Domino’s stores outside the United States are franchise-owned, which pay a certain percentage of their sales as royalty back to the company. Franchise operators are allowed to tailor certain items on the menu to suit local palates, a factor that Mr. Allison said helps the company stay relevant in Asia given the region’s diverse culture. Domino’s menu in India has more vegetarian offerings as against seafood-heavy toppings in Japan, and it doesn’t include pork in Muslim-majority Malaysia.

Domino’s is also exploring frontier economies such as Myanmar, a market with 60 million people, which recently opened doors to the world after decades of Western sanctions fenced it out of foreign cash.

“Myanmar is an interesting market that we have been exploring, although we don’t have any immediate plan at the moment,” Mr Allison said.

In Asia, Domino’s is present in China, India, Malaysia, Singapore, Japan, South Korea, Taiwan, Indonesia and Vietnam and is in the process of opening a store in Thailand before the end of the year.

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Indonesia Real Time provides analysis and insight into the region, which includes Singapore, Thailand, Indonesia, Vietnam, Malaysia, the Philippines, Myanmar, Cambodia, Laos and Brunei. Contact the editors at SEAsia@wsj.com.

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